Pay Gaps Widen In Major Law Firms


Posted on February 28, 2011 at 6:02 PM

This week Washington litigator Jamie Wareham left Paul, Hastings, Janofsky & Walker in favor of an annual salary of $5 million at DLA Piper, a significant pay raise. This recent hire is part of a growing trend on the part of major law firms of dedicating the majority of their resources to the strategic hiring of prominent lawyers, a trend recently reported in the Wall Street Journal. Firms are realizing that clients are often attracted to a lawyer’s prominent name and record, rather than the firm itself.

"We are focused on making big, strategic hires, who can allow us to achieve greater stature and visibility in the business community," said Frank Burch, chairman of DLA Piper, to the Wall Street Journal.

The benefits of a big-name hire not only enhance a firm’s reputation; when drawn to a specific lawyer at a firm, a client will also be less resistant to the firm’s rates – a valuable benefit, especially in the context of economic downturns.

The market for star lawyers has thus become quite favorable across the board, but the profitability for firms is double-edged. It’s unclear whether or not the value of a prominent hire is worth the negative consequences such a staggering pay gap will have on relations between the firm’s lawyers.

"Of course, [pay differences] can lead to tension,” Burch said. "If you pretend that doesn't exist you have your head in the sand."

The question thus becomes, is this strategy of big name hires worth the effects it will have on the firm? When the mid-level associate realizes that partnership is not so attractive, given the allocation of major resources to these star lawyers, he is likely to set his future elsewhere. The latest survey, according to Law People Blog, reveals that even though 70% of mid-level associates think they are securely on the partnership track, approximately 60% are looking to leave their firms within the next 5 years. It may be to early to analyze the profits of these major firms employing this strategy – the benefits may reveal themselves in the long-run. However, as of now, it’s the mid-level associates which are tempted to leave, and, according to a recent Citi Group report, it's the smaller firms (ones below the AmLaw 200) which are actually growing fastest.

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